MonitorsPublished on Jul 29, 2008
Energy News Monitor |Volume V, Issue 6
Will the Nuclear Deal lead to Energy Utopia?



he advertisements taken out by members and allies of the Congress party to endorse India’s Nuclear Deal with the United States focus primarily on the Deal’s energy related benefits. Under the caption, ‘1-2-3 of the Nuclear Deal’ the declaration by the Ministry of Petroleum & Natural Gas emphasises the potential of the deal to ‘assure energy supplies for the future, reduce dependence on oil and lead India towards it goal of ‘energy independence’. The Samajwadi Party goes further claiming that the ‘dependence on crude oil will reduce greatly and thus the cost of transportation and “everything else” can be reduced’.  It also makes paradoxical claims such as ‘inflation can be curbed’ and ‘India will again be seen as a sovereign power’. 

The claim that the nuclear deal will augment energy supplies for the future cannot be disputed. One does not have to be a nuclear scientist to observe that power generated from any source, be it from the sun, wind or uranium is necessary to meet growing demand for power and to reduce and eventually eliminate power deficits that cripple India’s industrial, commercial and social sectors. However the extent of contribution nuclear energy would make is disputable.  As pointed out in the article by Mr Shankar Sharma last week (Energy News Monitor Volume 5, Issue 5) even in the best case scenario, nuclear energy would meet only about 6 percent of India’s energy needs by 2030 as per the forecast in the Integrated Energy Policy Report.  On the other hand coal would contribute between 40-54 percent of India’s energy needs.  The inefficiencies that plague every section of the coal sector in India are legendary and these inefficiencies are among the key factors that contribute to power deficits.  Ironically the Government that was ready to relinquish power if it is not permitted to pursue the nuclear deal has done little or nothing to pursue reforms in the coal sector.   

The disproportionate emphasis on the nuclear deal hides other problems in the energy sector. Most of the messages on the deal have conveyed an impression that it is the lack of supply options in India that contribute to power deficits and energy shortfalls. The insightful observation made by Deepak Parikh, Chairman HDFC in report on the Indian Power Sector seems to suggest otherwise: “The Indian power sector is a leaking bucket; the holes deliberately crafted and the leaks carefully collected as economic rents by various stakeholders that control the system. The logical thing to do would be to fix the bucket rather than to persistently emphasize shortages of power and forever make exaggerated estimates of future demands for power. Most initiatives in the power sector (which could very well include the nuclear deal) are nothing but ways of pouring more water into the bucket so that the consistency and quantity of leaks are assured”.

Supply is favoured not only by the Government for rent extraction but also by the private sector as well as development banks and donor agencies. The bulk of technology transfer decided by donor agencies and development banks is for large supply oriented power generation projects. The approach of these agencies appears to be ill adapted to the special needs of transferring technology for enhancing efficiency in existing activities. The private sector finds large supply oriented projects more attractive, because returns are predictable apart from being assured.   

There is also valid criticism from experts in the field that nuclear power may be too expensive for the Indian market.  Figures presented by the Indian nuclear power corporation tend to show that nuclear power is competitive compared to average power generating cost in India.  But industry based costing cannot be relied upon not just in India but even in other parts of the world as the nuclear industry is generally heavily subsidised but rarely acknowledged.  Key determinants of the cost and economic viability of nuclear power must include, among other things, (1) the capital cost of reactor construction (2) the time taken to build the reactor (3) the interest rates associated with project financing (4) the reactor’s efficiency and performance (5) the costs of adequate liability insurance relating to accidents and terrorist acts (6) the required rate of return on capital invested (7) the cost of nuclear decommissioning (8) the cost of radioactive waste storage and disposal[1]. By conveniently ignoring one or the other of the above factors or by understating the figures for these factors it is possible to distort costs in favour of nuclear power.

Because nuclear energy has high capital cost and low operating cost, choosing an unrealistically low interest or discount rate can make nuclear energy look inexpensive.  Even a study by MIT, one of the leaders in technical education, uses a real discount rate of 5 percent that makes nuclear power look more acceptable in comparison with fossil fuel based power.  Despite the favourable assumptions, the MIT report is forced to conclude that ‘in deregulated markets, nuclear power is not cost competitive with coal and natural gas’.  But it adds on a rather optimistic note that ‘plausible reductions by industry in capital cost, operation and maintenance costs, and construction time could reduce the gap and that ‘carbon emission credits, if enacted by Government, would give nuclear power a cost advantage’.  Another study by the IEA and OECD also uses an unrealistically low discount rate of 5 percent to conclude that nuclear energy is the cheapest in 5 out of the 18 countries studied.  If a more realistic rate of 10 percent were used nuclear power would not have fared well against coal or gas based power in all the countries studied.  Competition for nuclear energy seems to be coming from above as well.  Renewable energy which was associated with prohibitive cost structures until very recently is catching up fast. On-shore wind power in certain excellent wind sites is now cheaper than nuclear power. The future appears to be bright for renewable energy as massive private sector interest in low carbon energy is fuelling innovation at a much faster pace than that in the nuclear sector. 

There is another side to the cost argument against nuclear power that is India specific. The power sector in India is beset with inefficiencies that it is capable of absorbing power only from the cheapest sources so that the cost of inefficiencies can be built in. Even natural gas is discredited as fuel for power generation in order to accommodate distortions and inefficiencies. The average power consumer in India pays about 30 percent more for power compared to consumers elsewhere in the world despite the fact that most of the power in India is generated from ‘cheap’ domestic coal because he has to pay for the inefficiencies in addition to power. Unless this fact is acknowledged criticism of nuclear power (or more so natural gas based power) purely on the basis of cost would amount to defending and sustaining inefficiencies in the Indian power sector. 

The claim that the nuclear deal will reduce India’s dependence on oil is not entirely true.  Nuclear energy is primarily a source for power generation and is not yet a substitute for oil in the transportation segment where oil is most widely used.  The share of oil based grid connected power generation capacity in the 10th plan period was less than 1 percent of the total.  Most of the capacity was accounted for by auxiliary and remote area power generation.  About 40 percent of captive capacity (1 MW and above) amounting to about 7700 MW used diesel as fuel in the 10th plan period. Increased availability of power from nuclear energy may reduce the volume of diesel consumed in captive and stand by power generators but the volume of diesel displaced is likely to be too small to make an impact oil imports. If technology advances sufficiently, it is possible that transportation is powered entirely by electricity generated from nuclear or other cleaner fuels in the next few decades.  Transportation could also be powered by hydrogen, an energy carrier that can be manufactured with nuclear energy.  But until that happens, the tyranny of oil is likely to continue through the internal combustion engine not just in India but also in most of the rest of the world. 

Even though money is being poured into research to find alternatives to oil, the high standards oil has set in terms of energy density and transportability are proving to be very hard to beat. It is not without reason that Rudolf Diesel, the inventor of the diesel engine, failed in his efforts to promote peanut oil as a substitute for petroleum in his engines. In the foreseeable future, India along with many other oil importing countries including the United States is likely to be dependent on oil supplies from other countries even in the unlikely event of nuclear power replacing the entire power generating capacity.   In order to substantially reduce dependence on oil, India would have to implement tough domestic reforms that include allowing the price of petroleum products to reflect global realities, increasing efficiency in oil use and investing heavily in public transport systems. The sad reality is that indulging in International posturing over India’s credentials in the nuclear domain is much easier than implementing sensitive domestic reforms.

The claim that the nuclear deal would lead India towards ‘energy independence’ is illusionary. As per the Integrated Energy Policy report, India’s import dependence by 2030 is likely to remain in the range of 30-60 percent with oil dependency alone likely to remain in the range of 90-93 percent.  Irrespective of whether we approve of it, the world relies on a capitalist system which favours specialization in resource development and division of labour. Trade is an important manifestation of this system and energy forms a large part of that trade.  If energy imports are restricted on the rationale of ‘energy independence’ energy prices would increase dramatically and the economy would collapse in a matter of days. The value of the nuclear deal lies in the fact that it will release India from forced ‘independence’ that has hitherto crippled the development of its nuclear industry and make it more ‘dependent’ on international nuclear technology and uranium supplies. What this would translate into is cost reductions for nuclear power generation as uranium from the international market is less expensive than locally mined uranium.  In addition India will have access to newer, safer and cheaper reactor technologies. 

While it is tempting to project the nuclear deal as an instrument for energy utopia that would liberate India from power shortages as well as the tyranny of oil, it is not very realistic.  The nuclear deal is necessary not because it is the answer to all of India’s energy challenges but because it will provide India with a key energy ‘option’ for the future.  There is widespread agreement that a replacement for fossil fuels will emerge in the long term future but no one is sure what that would be.  Even though nuclear energy is among the top contenders for replacing fossil fuels, especially in the light of its carbon credentials and low fuel costs, it is not yet the clear winner.  If nuclear energy does win the fossil fuel ‘end game’ eventually, the nuclear deal with the United States will provide India all the cards necessary to be a successful player.     

(A shorter version of the article appeared in the Pioneer on 19th July 2008 titled “N-hopes premised on weak facts and cloudy estimates”)




Lydia Powell

Visiting Fellow
Observer Research Foundation  

[email protected]

Electricity Regulatory Commissions & Unviable Power Projects

A Unique Case of Opposition for a Coal Power Project in Karnataka

Shankar Sharma, Consultant to Electricity Industry



n a unique case recently the Karnataka Electricity Regulatory Commission admitted for hearing a petition by Mysore Grahakara Parishad against the decision of the state govt. to set up a coal based thermal power station near Mysore, and in the relevant land mark order has advised the state govt. to reconsider its decision.  This article is based on the content of such a petition, the process adopted and order issued by KERC.

1. Preamble:

Many of the ill-conceived coal based power projects in the country are facing wide spread opposition on social and environmental grounds. When elected governments refuse to listen to their sentiments the concerned people keep looking for innovative ways of opposing such projects, which have the potential to threaten their very livelihoods. Recently Mysore Grahakara Parishad (MGP), which is an NGO based in Mysore, used the good offices of Karnataka Electricity Regulatory Commission (KERC) to oppose the proposal by the state govt. to set up a coal based thermal power station in an ecologically sensitive environment in Chamalapura village of Chamarajanagara district. This article is based on the gist of such a petition and KERC’s order thereof.

This petition by MGP is probably only one of its kind in the country to come up before a State Electricity Regulatory Commission, and can be viewed as a test case in the exercise of relevant powers vested by IE ACT 2003 in Electricity Regulatory Commissions.

2. Petition by MGP

Petition was filed as an application under Sec. 86(2 & 4) of IE Act 2003, and Sec. 11 (b), (d), (e), (f), (i), (j), (l) of Karnataka Electricity Reforms Act 2000.  In addition the requirements of the National Electricity Policy were also referred to.

The petition sought advice from KERC to the Government of Karnataka on the suitability of establishing 1,000 MW coal based power projects at different places in Karnataka, including one at Chamalapura near Mysore. The following were quoted as the grounds for the petition:

- According to media reports, the Government of Karnataka has a proposal to set up 1,000 MW coal based power plants at three locations in Karnataka including one at Chamalapura village near Mysore.

- The policy of the Government of Karnataka to establish and to encourage the establishment of more coal based power plants is unviable as there is no known reserve of any type of fossil fuels in the state.

- The Government of Karnataka has provided many concessions, including large chunk of lands and other facilities, to set up these coal based power plants.

- These power projects are not in the overall interest of the public in the state as they will burn enormous amounts of coal and result in rapid deterioration of the environment, rapid depletion of our natural resources, and in social tensions and upheavals due to population displacement.

- They will result in the deterioration of quality of life for all sections of society.

- Such large coal power projects will also aggravate the pressure on land and fresh water.

- Investment in such large polluting plants without first harnessing all the benign alternatives to meet legitimate demands for electricity will be in complete violation of the letter and spirit of IE Act 2003, KER Act 2000, and the National Electricity Policy.

- When suitable alternatives are available, establishing such costly power stations will make the cost of electricity prohibitively high rendering many commercial and industrial enterprises uneconomical and will adversely affect the competition, efficiency and economy in developmental activities of the state.

3. Detailed arguments in support of the petition

The following arguments were offered in support of the petition:

3.1. There are many technically and economically viable and environmentally benign alternatives with lower gestation periods than additional coal power plants to meet the legitimate demand for electricity in the state. 

3.2. Alternatives such as (i) bringing down the AT&C losses to international level, (ii) effective Demand Side Management to ensure the optimum usage of electricity, (iii) energy conservation and (iv) economical deployment of new and renewable energy sources will enable development of all sections of society on a sustainable basis, and will also minimize the social and environmental impact on society.

3.3. The State of Karnataka has no known reserve of coal. All the coal required for these power plants will have to be either transported over long distances within the country or will have to be imported at considerable cost.

3.4. Whereas additional coal power will increase the average price of delivered electricity to the end consumers, the alternatives mentioned in section 3.2 will not only reduce the cost of supply immediately but will also assist in controlling the price of electricity in future.

3.5. Sec. 86 (2) of IE Act 2003 says: "The State Commission shall advise the State Government on all or any of the following matters, namely:-

(i) Promotion of competition, efficiency and economy in activities of the electricity industry;  

(iv) matters concerning  generation, transmission,  distribution  and trading  of electricity“.

3.5 Section 86 (4) of IE Act 2003 says: “In discharge of its functions the State Commission shall be guided by the National Electricity Policy, National Electricity Plan and tariff policy published under Sec.3.”

3.6. The National Electricity Policy aims at achieving the following objectives:

* Availability of power: demand to be fully met by 2012. Energy and peaking shortages to be overcome and adequate spinning reserve to be available.

* Supply of reliable and quality power of specified standards in an efficient manner and at reasonable rates.

* Financial turnaround and commercial viability of electricity sector.

* Protection of consumers' interests.

Among others, the National Electricity Policy aims to address the following issues:

* Energy conservation

* Environmental issues

* Co-generation and non-conventional energy sources

3.7. If these aims of the National Electricity Policy are kept in mind, the aim of the Policy of fully meeting the power demand and keeping adequate spinning reserve will be impossible to achieve without drastically improving the overall efficiency of the electricity industry including Demand Side Management and energy conservation. Without vast improvements in the use of power available now, and without optimizing the energy conservation, the environmental issues and consumer interests cannot be adequately protected.

3.8. The electricity supply companies in the state are already under heavy financial losses due to inefficiency in operations and poor revenue collection. A higher share of thermal power will increase the average cost of supply, and the commercial losses of these electricity supply companies will further increase to a level at which it can collapse the whole supply system. The financial burden on the state due to inefficiency in the electricity industry is already heavy and will become much larger, adversely impacting various developmental activities.

3.9. The huge inefficiency and lack of transparency in the electricity sector are forcing the authorities to conceive uneconomical power projects, and are also creating a scenario wherein KERC may be indirectly pressurized to approve Power Purchase Agreements (PPAs) that will eventually place a heavy tariff on consumers.

3.10. Having already lost a considerable portion of thick rain forests in the environmentally sensitive Western Ghats and lots of agricultural lands in the name of various developmental activities, the State cannot afford to lose anymore of such environmentally sensitive forests or fertile agricultural lands for such high impact projects. 

3.11. Since these issues are against the letter and spirit of IE Act, KER Act and the National Electricity Policy, there is an urgent need for the society to apply course correction immediately to the way the electricity companies in the state are operating by improving the efficiency of the industry as a whole to make them technically strong, commercially viable, and operationally sustainable in the overall interest of the consumers in the state.

4. Additional facts of the Case

The following points were made during the public hearing:

4.1 Whereas the IE Act, KER Act and the National Electricity Policy have put huge emphasis on providing reliable and quality power of specified standards in an efficient manner and at reasonable rates for protecting the consumer interests and the environment, the actual scenario of the power sector in the state has been one of noncompliance in all respects.

4.2 Since 1947, the state agencies entrusted with the supply of electricity have continuously failed to live up to the expectations of the public. Except for a short period in 1970, the power supply scenario in the state has been one of continuous power cuts, either during peak hours or in the case of annual energy.  While Karnataka's own generating capacity has increased by about 7,600 times during the last 100 years; its total power availability including the central sector share has increased by about 10,800 times. Despite such phenomenal increase in the capacity addition, there have been power cuts almost continuously since mid 70s.

4.3 Establishment of additional generating capacity based on large dams or coal or gas or diesel can be only at a huge cost to the state because of avoidable economic, social and environmental issues.

4.4 The average direct cost of establishing additional power stations based on large dams or coal or gas or diesel is known to be in the range of Rs. 4 to 6 crores per MW, which does not include the indirect costs like additional transmission system costs, R&R costs for displaced people, environment costs, community health costs, etc. All these costs plus various subsidies and tax holidays provided to the electricity generating companies put together can result in very heavy costs to the end consumer. In contrast, the technically and economically viable alternatives mentioned in 3.2 above can be of much lower societal costs, of much shorter gestation period, have minimal or nil recurring costs, and are sustainable because their economic, social and environmental impacts on society will be minimal.

4.5 Whereas the objective for setting up the additional coal based power stations is said to be meeting the peak demand, the coal based power stations are essentially base load power stations in nature. Large addition of such coal based power stations without proper analysis of Karnataka's power situation will render the addition irrational, as they will lead to surplus base load capacity with low overall Plant Load Factor (PLF) in the near future. Such a situation will lead to gross underutilization of the state's resources, and higher delivered cost of power to the end consumers.

4.6 An objective analysis of the power scenario in Karnataka will reveal that its existing infrastructure including the generating capacity is not being utilized to the full extent possible. With reference to Tables 1, 2 & 3 below, it can be safely averred that whereas the net potential power capacity available to the state has been about 7,800 MW, the state could not even meet a gross peak demand of about 6,300 MW in 2006-07.  The situation is identical in the case of annual energy.

 Table 1 Available power capacity in Karnataka as on 28.2.2007 (MW)

State Sector (all types of fuels)


Private Sector


Share in Central Sector projects of

Southern Region




 Source: CEA website as on 21.4.2007

Table 2 Net power availability in Karnataka as on 28.2.2007 (MW)





Aux. consumption

@ 9% for thermal; @2% for hydro    {B}


Outage @ 5%   {C}

Net capacity


for use



2,185 + 917













Not applicable








Source: compiled from different sources

Table 3 Electricity Demand, supply and shortage in Karnataka: (April 2007 - Oct 2007)





% Deficit

Peak Hour

Requirement (MW)





Annual Energy

Requirement  (MU)





 Source: CEA Website as on 1.12.07

4.7 The fact that the AT&C loss of about 32% if brought down to the international level of less than 10%, can alone result in virtual additional capacity of about 22% or about 1,400 MW. 

to be continued

Views are those of the author                      

Author can be contacted at [email protected]

Beyond the Climate Crisis: A Critique of Climate Change Discourse (part – IV)

Eileen Crist

Continued from Volume V, Issue No. 5…


he intrinsic resilience of life in the face of environmental challenges—including severe ones such as climatic upheaval—has been so weakened that many species have been divested of their ability to cope. According to conservation biologist Reed Noss, species can adjust to climate change in three ways: migration to suitable sites, phenotypic plasticity or acclimatization, and evolving adaptive traits. “The only other alternative,” he notes, “is decline and ultimately extinction.”32 The human impact has gravely weakened the three coping mechanisms of species in response to climate change.

While species and ecosystems have faced climate shifts during life’s long tenure, species and ecosystems have never faced climate change on a planet dominated by Homo sapiens. The geological record reveals that life has been capable of handling climatic shifts within the (current) range of the present one.33 One crucial difference is that life then, in contrast to now, had many more degrees of freedom in which to move. Paleoecologists studying species’ reactions to previous climate change have found that range shifts are their prominent response; different species move at different rates and in different directions, attempting to track their preferred climate regimes. The key information from the fossil record is that species tend to move as individuals, rather than as ecosystem groupings, since species have different “climatic envelopes” (i.e., climate-related needs and tolerances). Ecosystems disassemble as communities of species are torn apart, eventually aggregating elsewhere in new configurations.

Discovering this pattern has been eye-opening for the scientific under-standing of present-day trends and for anticipating how things will unfold in this century and beyond. Today, the movement of species is blocked by cities, suburbs, rural settlements, agro-industrial landscapes, fences, high-ways and roads, airports, malls, and other constructed environments. As species attempt to track needed climate regimes by moving—the trend scientists are seeing today34—there are fewer places for them to go and no shortage of obstacles on their paths. Such is the synergy of climate change in a world of converted and fragmented landscapes. Severe limitations in the ability of species to disperse and assemble new ecologies are foreboding for biodiversity. Thus, while scientists have not found evidence for large-scale extinctions in the substantial transitions between glacial and interglacial periods, a spasm of losses is the predicted aftermath of anthropogenic global warming—with potentially one million species slated for climate-change-driven extinction within the twenty-first century35—because of the interactive effect between a rapidly changing climate and unavailable or broken-up habitat.

The looking-glass of global climate change starkly reflects the extent to which wilderness has been quashed or constricted, especially in the last few centuries. Productive and accessible wildlands and waterways have rarely been spared conversion or exploitation. Wilderness has been allowed to persist in areas that are difficult to access, like mountain ranges; in places too cold and desolate for human extensive habitation, like tundra and the poles; in the deepest seas, as long as they remain forbidding; and in protected natural areas placed off limits to intensive human activity.36

Enter climate change: every one of them has become endangered or threatened. Regarding mountains, Flannery notes that “nothing in the predictive climate science is more certain than the extinction of many of the world’s mountain dwelling species.”37 Mountain ecosystems are not only unique in their own right, but they also have served species as refugia out of overexploited valleys. But mountain life is in trouble, for as species move upslope in response to climate change, they can only go so far before they run out of territory.38 The Arctic and the Antarctic are also among the last stands of wilderness, and their landscapes and wildlife are being run down by civilization’s smokestacks and tailpipes.39 The ocean deep may harbor the wildest remaining places on the planet, with their virtually unexplored menagerie of creatures, but even the forbidding depths are not guaranteed to escape this climatic shift.40 The fate of parks and reserves worldwide is similar,41 with protected areas losing, or in danger of losing, species and habitat. The borders of natural parks cannot ward off the new climate: animals and plants seeking to move are likely to find that the boundaries drawn around their homes do not delineate sanctuaries but traps.

What remains of wilderness has been either too inaccessible for human makeover or set aside as a token of nature’s free condition. In 1990, philosopher Tom Birch wrote an essay entitled “The Incarceration of Wildness: Wilderness Areas as Prisons,” in which he described protected natural reserves as akin to reservations in which colonizers corral indigenous people. Beyond theoretically startling, this argument is proving empirically prescient.42 In its guise as “Dr. Jekyll,” society has conceded some havens for the wild, and yet, in the very same project, “Mr. Hyde” has been busy incarcerating life. Both the nonhuman world and we ourselves are about to pay the cost of the oxymoronic enterprise of imprisoning wilderness: species will be hard pressed to handle global warming by moving up mountains, northward, deeper into the seas, or out of parks. The mirror of climate change makes remarkably transparent, if it is not already, that wilderness cannot persist as a disconnected patchwork of places—and that any lingering impression of habitats too sheltered or too remote to be safe from serious onslaught is a mirage.43

Migration is the most important coping mechanism of species in response to climate change, and I have discussed the ways that it has been undermined. But there are two more ways for species to adapt—by phenotypic plasticity and by evolving new traits. Phenotypic plasticity refers to the capacity of species to adjust to new circumstances: to colder or hotter weather, shifting seasons and phenological challenges, new hydrological regimes, or a different diet. There are two limitations regarding species’ phenotypic plasticity in the face of global warming, and both implicate the human impact. One is that the greater the speed of environmental change, the more the adaptive ability of organisms is challenged. Anthropogenic climate change is unfolding faster than episodes of the past—far faster than many species can or will be able to handle. The second limitation involves the kinds of species that exhibit phenotypic plasticity—and of course these are the generalists, or the weedy species, which modern civilization has already promoted. Climate change is expected to boost them again: they will adjust to changing conditions better, colonize opening niches with greater alacrity, and out-compete habitat specialists in their own erstwhile homes.44

Not only are species’ range-shift responses to climate change hampered by the ways landscapes have been shaped, and habitat specialists challenged by the speed of climate change and disadvantaged by generalists, but the potential of genetic adaptations—via selection of better suited varieties—has also been undermined. Genetic change will undoubtedly occur in certain instances as a consequence of climate change.45 But the reduction of population units and of population sizes that has been imposed on wild species (previously discussed) is forcing them to face the challenge of a new climate with compromised genetic resources. As scientists Thomas Lovejoy and Lee Hannah explain in the concluding paper of their volume Climate Change and Biodiversity, “small, fragmented populations reduce the pool of individuals capable of rapid response to climate change, or eliminate the genetic variants for rapid response altogether.”46

In sum, species’ coping responses to climate change—range shifts, acclimatization, and genetic change—have been either vitiated or disabled. The impact of global warming on the natural world can thus be likened to the onslaught of a disease agent on an immune-compromised organism. Nature is highly vulnerable to climate change—and would have been even if this episode of climate change were not anthropogenic—because of the patterns that modern human beings have stamped upon landscapes and the ways that life’s diversity has already been diminished. To paraphrase ecologist Alan Pounds: climate change is a bullet threatening to annihilate many species and ecosystems, but industrial-consumer civilization is pulling the trigger.47


32 Reed Noss, “Beyond Kyoto: Forest Management in a Time of Rapid Climate Change,” Conservation Biology 15, no. 3 (June 2001): 578–90; here, p. 581.

33 But if the rate of temperature increases as swiftly, over the next century, as fore-casted (that is, if we do not act to stabilize the climate), it will exceed the “average rates experienced during the last 120,000 years” and paleoclimatic conditions will no longer serve as “near analogs for a rapidly changing anthropogenically warmed world.” Lee Hannah, Thomas Lovejoy, and Stephen Schneider, “Biodiversity and Climate Change in Context,” in Lovejoy and Hannah, Climate Change and Biodiversity, p. 5. See also Anthony Barnosky, “Effect of Climate Change on Terrestrial Vertebrate Biodiversity,” in A. D. Barnosky, ed., Biodiversity Response to Climate Change in the Middle Pleistocene: The Porcupine Cave Fauna from Colorado (Berkeley: Univ. of California Press, 2004), pp. 341–45.

34 Gian-Reto Walther et al., “Ecological Responses to Recent Climate Change,” Nature 416, no. 28 (March 28, 2002): 389–95; Camille Parmesan and Gary Yohe, “A Glob-ally Coherent Fingerprint of Climate Change Impacts Across Natural Systems,” Nature 421, no. 2 (January 2, 2003): 37–42; Camille Parmesan and John Matthews, “Biological Impacts of Climate Change,” in Martha J. Groom et al., eds., Principles of Conservation Biology, 3rd ed (Sunderland, MA: Sinauer Associates, Inc., 2005), pp. 333–74.

35 In their report on extinction estimates as a consequence of climate change, Chris Thomas and his colleagues maintain that “anthropogenic warming at least ranks alongside other recognized threats to global biodiversity . . . [and] it is likely to be the greatest threat in many if not most regions. Furthermore, many of the severe impacts of climate change are likely to stem from interactions between threats . . . rather than from climate acting in isolation.” Chris Thomas et al., “Extinction risk from climate change,” Nature 427 (Janu-ary 8, 2004): 147. An earlier review piece similarly noted that “habitat fragmentation in conjunction with climate change sets the stage for an even larger wave of extinction than previously imagined.” Maarten Kappelle et al., “Effects of Climate Change on Biodiversity: A Review and Identification of Key Research Issues,” Biodiversity and Conservation 8, no. 10 (October 1999): 1383–97. See also Parmesan and Matthews, “Biological Impacts of Climate Change”; Noss, “Beyond Kyoto.”

36 I am not using “wilderness” to mean pristine, but to refer to areas that have become the last large-scale refuges for wild animals, plants, and ecosystems. It is an environmental commonplace that no place on Earth can any longer be called pristine. For example, the degree of accumulated pollution in the deep sea, one of the most inaccessible places on Earth (to visit, but not to dump in), is shocking. See Tony Konslow, The Silent Deep: The Discovery, Ecology, and Conservation of the Deep Sea, chap. 7, “Dumping and Pollution” (Chicago: Univ. of Chicago Press, 2007).

37 Flannery, The Weather Makers, p. 172.

38 See Flannery, “Leveling the Mountains,” chap. 18 of The Weather Makers; Stephen Williams, Elizabeth Bolitho, and Samantha Fox, “Climate change in Australian tropical rainforests: an impending environmental catastrophe,” Proceedings of The Royal Society B 270, no. 1527 (September 22, 2003): 1887–92.

39 John Roach, “Penguin Decline in Antarctica Linked with Climate Change,” National Geographic News, May 9, 2001; Andrew Derocher et al., “Polar Bears in a Warm-ing Climate,” Integrative and Comparative Biology 44, no. 2 (April 2004): 163–76.

40 See Flannery, “Boiling the Abyss,” chap. 20 of The Weather Makers; Koslow, “Climate Change,” chap. 9 of The Silent Deep.

41 Lee Hannah et al., “Conservation of Biodiversity in a Changing Climate,” Conservation Biology 16, no. 1 (February 2002): 264–68; G. F. Midgley et al., “Assessing the Vulnerability of Species Richness to Anthropogenic Climate Change in a Biodiversity Hotspot,” Global Ecology and Biogeography 11, no. 6 (November 2002): 445–51; J. Alan Pounds et al., “Case Study: Responses of Natural Communities to Climate Change in a Highland Tropical Forest,” in Lovejoy and Hannah, Climate Change and Biodiversity, pp. 70–74.

42 Tom Birch, “The Incarceration of Wildness: Wilderness Areas as Prisons,” in J. Baird Callicott and Michael P. Nelson, eds., The Great New Wilderness Debate (Athens: Univ. of Georgia Press, 1998), pp. 443–70.

43 This is not to deny the importance of “wilderness areas and national parks [as] the bedrock underlying protection of biodiversity and rewilding” (Foreman, Rewilding North America, p. 169). Wilderness reserves will form the foundation for the next step of “deep conservation”: interlinking them in broad, landscape-level dynamic patterns that allow the flow of species, individuals, and genes of fauna, flora, and other organisms. See Michael Soulé and Reed Noss, “Rewilding and Biodiversity: Complimentary Goals for Continental Conservation,” Wild Earth 8, no. 3 (Fall 1998): 19–28; Reed Noss, “Wil-derness Recovery: Thinking Big in Restoration Ecology,” in Callicott and Nelson, The Great New Wilderness Debate, pp. 521–39; Tom Butler, ed., Wild Earth: Wild Ideas for a World out of Balance (Minneapolis, MN: Milkweed Editions, 2002); Josh Donlan et al., “Pleistocene Rewilding: An Optimistic Agenda for 21st Century Conservation,” in Mar-cus Hall, ed., Restoria (Cambridge, MA: MIT Press, forthcoming); Guynup, 2006 State of the Wild.

44 Thomas Lovejoy and Lee Hannah, “Global Greenhouse Gas Levels and the Future of Biodiversity,” in Lovejoy and Hannah, Climate Change and Biodiversity, pp. 387–96.

45 Chris Thomas, “Recent Evolutionary Effects of Climate Change,” in Lovejoy and Hannah, Climate Change and Biodiversity, pp. 75–88.

46 Lovejoy and Hannah, Climate Change and Biodiversity, p. 389.

47 Regarding the chytrid fungus that has driven numerous Central and South American frog species to extinction, Alan Pounds of Costa Rica’s Monteverde’s Biology Station said: “The disease was the bullet killing the frogs, but climate was pulling the trigger” (quoted in Mac Margolis, “Why the Frogs Are Dying,” Newsweek International, October 16, 2006).

to be continued

Courtesy: TELOS

The Future of Liquid Biofuels for APEC Economies (part –V)


Continued from Volume V, Issue No. 5…


Alternative Fuel Vehicles


20-compatible vehicles are gaining interest in Thailand due to the excise tax on vehicles taking effect January 2008.9 Ford pioneered E20-compliant vehicles in Thailand more than three years ago. Toyota, the local market leader, will only introduce E20 cars, likely sometime in 2008, once it determines that its new E20 engines are efficient. Honda Automobile (Thailand) Co. announced that all of its 2008 car models would be E20-compliant. E20 cars in Thailand are also available from Mazda, Mitsubishi, and Nissan. 

FFVs, as mentioned above, are designed to run on straight gasoline or any gasoline-ethanol blend up to E85 from a single tank. FFVs are available mainly in the United States (about 6 million vehicles) and a small number are available in Canada and Australia. The US National Highway and Traffic Safety Administration gives vehicle manufacturers corporate average fuel economy credits as an incentive for their production. Therefore, FFVs have a tangible economic benefit to manufacturers and are offered to consumers at no incremental cost. Vehicle manufacturers estimate that the cost of converting a conventional vehicle to an FFV in the original manufacturing process is less than $100. FFVs available in the US and Canadian markets are from Dodge, Chevrolet, Ford, GM, Daimler-Chrysler, Jeep, Nissan, Pontiac, and Saturn. Saab 9-5 2.3t was introduced to Australian customers in 2007.   

Dedicated ethanol vehicles are not available in the APEC region. Volkswagen, Fiat, GM, and Ford have been producing these types of vehicles for many years, predominately for the Brazilian market.  


Currently, there is no specific customs classification for fuel ethanol. Ethanol is traded in the APEC region and around the world as potable and denatured (unfit for human consumption). Ethanol is denatured for fuel and industrial purposes, with, for example, acetone and methanol added according to customer specifications. Gasoline is used as denaturant for fuel ethanol. Both denatured and potable alcohol can be used for biofuel production. Thus, it is difficult to establish from trade flows which share of imported alcohol is used in biofuel production.  

World ethanol trade has been relatively stable over the years, less than 4 hm3 (1.0 hm3 = 106 m3 = 109 liter) per year. However, the situation changed in 2005-2006 when the trade volume increased to about 5.0 and 7.8 hm3 respectively (F.O.Licht 2007). The steep increase in ethanol trading in 2006 was mostly due to the removal of fuel additive methyl tertiary butyl ether (MTBE) in the United States, which led to the import of large volumes of ethanol from Brazil; China; and Canada.  

In 2007, APEC economies imported about 3.4 hm3 of ethanol. This includes extra- and intra-regional trade, and it is slightly lower than in 2006. The largest importer in the region and worldwide is the United States, which imported close to 2 hm3 of ethanol in 2007, down from 2.7 hm3 in 2006. This reduction is mostly due to increased domestic production in the United States a trend seen in other economies such as Thailand; Indonesia; and the Philippines. The second largest importer of ethanol in the region in 2006 and 2007 was Japan, about 0.4 hm3 annually; however, statistics suggest that it was used as beverage and industrial alcohol. Canada has increased its ethanol import substantially (mostly from the United States) from about 0.1 hm3 in 2006 to 0.4 hm3 in 2007 to supplement domestic fuel ethanol production. Korea is also a large importer in the region with approximately 0.25 hm3 annually; but, as with Japan, it is not for fuel purposes. The push for ethanol use as a transportation fuel has led Australia and Chile to increase the volume of imported ethanol. Although China reduced ethanol imports in 2007, it may become a major importer in the region if E10 is extended across the economy. Local production will not be able to meet expected demand, even though China is looking at alternative feedstock such as cassava and sweet sorghum.  

Ethanol exports from the APEC region in 2007 were around 1 hm3, down from 1.3 hm3 in 2006. China was the major exporter in the region in 2006, with about 1 hm3 shipped to the United States. However, the economy has reduced its export dramatically, mainly due to concerns over meeting domestic biofuels targets. Biofuels targets are also the reason for declining ethanol export from Canada; Australia; and New Zealand. On the other hand, economies with no concrete biofuels targets (such as Indonesia and Viet Nam) have expanded their ethanol exports as additional sources of revenue. Thailand also substantially increased ethanol exports in 2007. Although the Thai Government discourages ethanol exports to guarantee sufficient domestic supplies, the export is expected to grow as the local production increases. In 2007, the largest exporter in the region was the United States with about 0.6 hm3, predominantly for Canada; the United Kingdom (UK); and Mexico. 

Biodiesel trade in the APEC region and around the world is not significant. Because the European Union (EU) is the world’s largest producer and consumer of biodiesel, it is the main destination of biodiesel produced in the APEC region. There is, however, a small amount of biodiesel traded within the region. Malaysia exported about 60,000 m3 of palm oil-based biodiesel to the United States; EU; and Japan in 2006-2007. Chemrez Inc., a company based in the Philippines, has exported 500 m3 of coconut-based biodiesel to Germany and to Asian markets including China; Chinese Taipei; South Korea; and Malaysia. Indonesia exported small amounts of biodiesel to China; the EU; and the United States. Natural Fuels Australia Ltd exported 8,800 m3 of palm oil biodiesel to the United States and Asia. 

Using vegetable oils as feedstock for biodiesel has increased the demand and has led to significant increase in trade of major oilseeds and products. According to the Food and Agricultural Policy Research Institute (FAPRI), world trade in vegetable oils is anticipated to continue to increase in the next 10 years, with palm and soybean oil accounting for the major part of the expansion. Even today, these two crops account for about 85% of global oilseeds export (Worldwatch Institute 2007).   

Although most biofuels and feedstocks in the APEC region are produced and consumed in domestic markets, there is enormous potential for trade between APEC and non-APEC economies (biotrade). Despite valid concerns about the environmental and food security implications of biofuels, such trade, if done right, could generate significant economic, environmental, and social benefits. For biotrade to be successful there is a need for the specifications, testing, and use to be regulated by means of internationally accepted standards. Unlike their petroleum counterparts, the biofuels of today are subject to different specifications in different jurisdictions. Without harmonization and improvement of these standards, it could become a barrier to trade. Brazil; the EU; and the United States formed the Tripartite Task Force in 2007 to address these standardization issues. The Task Force recently completed a review of existing bioethanol and biodiesel standards, identifying where greater compatibility could be achieved in support of the global commoditization of biofuels (Tripartite Task Force 2007). In 2007, the APEC Energy Working Group initiated a project to establish guidelines for development of biodiesel standards in the region (APEC EWG 2008). An APEC Energy Trade and Investment Study will identify existing barriers to energy trade and investment in the APEC region. An APEC Energy Trade and Investment Roundtable meeting will be held in Cairns, Australia, on September 24-25, 2008, to develop a plan addressing these trade and investment impediments.  


There are various levels of government involvement and support for biofuels development in the APEC region. While governments in some economies such as Indonesia; Mexico; Russia; and Viet Nam have expressed interest and support for the biofuels industry, there are no policies in place. On the other hand, the governments of Australia; Canada; China; Thailand; and the United States have adopted a range of policy instruments that affect the production and consumption of biofuels. 

The most common policy supporting biofuels in the APEC region is the mandate for compulsory blending with fossil fuels to a certain percentage (Table 7). Other policy instruments include fuel excise-tax exemptions and rebates (full or partial); government fleet requirements to use biofuels; tax-exempt bonds for finance (particularly in the United States); subsidized loans and loan guarantees; biofuels producer credits; subsidies toward purchase of vehicles and infrastructure that can use biofuels; subsidies not normally associated directly with biofuels, such as agricultural farm support; environmental legislation mandating certain types of fuel additives (typically for fuel oxygenation) related to reducing vehicle exhausts; and government-supported research, development, and demonstration funding for current and next-generation biofuels and technologies.

Table 7 Biofuel Mandates and Targets in APEC Economies



9 The cabinet approved an excise tax reduction for car using gasoline containing at least 20% of fuel ethanol, proposed by the excise department and effective January 1, 2008.     

to be continued

Courtesy: Asia-Pacific Economic Cooperation





Acute rig shortage hits RIL, ONGC`s oil drilling operations

July 29, 2008. Reliance Industries and ONGC, failed to benefit from record crude oil prices in the first six months of this year as the availability of rigs declined during the period. This, consequently, forced the companies to drill less. India lost rigs to foreign countries and this affected nearly 62 per cent of the exploration and production activity in the country’s deep water oil fields. The number of offshore rigs deployed in the country declined by 14 per cent to 26 in the first half of 2008 as Latin America added 20 per cent more to its tally, taking the count to 89, according to the data released by Baker Hughes, the world’s third largest oil field services company.


BPCL slips into the red

July 29, 2008. State-run oil marketing company BPCL has reported a net loss of Rs 1,066 crore ($250.3 mn) for the first time in two years, as doubling of crude oil prices in the last year led to a higher loss from selling fuel at subsidised rates. The company had posted a net profit of Rs 192 crore ($45 mn) in the corresponding quarter last year. It has recorded the largest loss for the quarter on account of high crude oil and product prices, which could not be fully passed on to the consumers.

The company’s gross under-recoveries were Rs 11,550 crore ($2.7 bn) for the three months ended June 2008 compared with Rs 2,885 crore ($677.5 mn) at the end of the corresponding quarter last year. Crude oil prices have shot up to $126.33 a barrel in June 2008 from $59.25 a barrel in June 2007.

Tata Projects, Engineers India form joint venture

July 27, 2008. Tata Projects Ltd and the public sector Engineers India Ltd have formed a joint venture to undertake projects in the hydrocarbon sector. The memorandum of understanding for forming the proposed company was signed in July 2007, but the venture, Tata Engineers India Ltd (TEIL), was incorporated last week.

The joint venture will have a start-up equity capital of Rs 10 crore ($2.3 mn), equally shared by the two partners. Engineers India Ltd will bring to the table its expertise in refinery engineering and procurement, while Tata Projects will chip in with its capabilities in project management. The proposed venture will initially pursue opportunities in the refinery sector. Opportunities also exist in putting up mini refineries and units within refineries such as hydrocrackers and crude distillation units. The joint venture will vigorously pursue opportunities in the hydrocarbon sector in West Asia.

IOC diesel sales to Karnataka rise 45 pc

July 27, 2008. IndianOil Corporation, Karnataka had kept pace with the increased demand for diesel in the State by transhipping 9,500 kilo litres during the year to Bangalore alone, registering an increase of 80 per cent over the previous year’s average sales during July.

For the entire State the supplies have risen by 45 per cent over the same period last year. Against a normal anticipated growth of about 12-15 per cent over the previous year’s sale during the same period, the growth during the current month in diesel sales for the oil industry has been around 30 per cent for the entire State and 32 per cent for Bangalore.

RIL looking for oil storages globally

July 23, 2008. RIL is exploring for oil storages globally to market the huge volume of clean products from its new refinery coming on stream this quarter. RIL has already acquired some petroleum storage tanks in the Carribean. This would allow the company to meet demand from the US Gulf Coast and Latin America. The storages will serve as intermediate points for RIL to tap the distribution areas, mainly in western markets where the company aims to supply its premium oil products.

In Asia, the company is aiming to lease tanks in Singapore. The latest term supply deals would still leave RIL with more than enough products to export on a spot basis when the new refinery comes on-stream. The company's 580,000 barrels per day (bpd) export-oriented plant is expected to be commissioned in September. Reliance Petroleum expects to complete the refinery ahead of its initial schedule of December. RIL currently operates a 660,000 barrels per day (bpd) refinery at Jamnagar, Gujarat.

Transportation / Trade

RIL arm set to supply gas to 52 cities

July 28, 2008. RIL, which is set to become the single-largest gas producer in the country once its Krishna-Godavari gas hits full production, may also become the largest gas distributor soon with operations in 52 major cities.

Reliance Gas Corporation (RGCL), a subsidiary of RIL, has emerged as the sole entity to submit expression of interest (EoI) for these cities. The company would have an exclusivity over gas distribution in these cities for five years as per the gas distribution policy. RIL’s city-gas business is backed by its claim that the price of the piped gas it would supply would be cheaper by one-third (33%) the price of conventional cooking gas (liquefied petroleum gas) supplied in cylinders.

Gail India, which has been the leading city gas distribution company, with operations in Mumbai and New Delhi, has taken a back seat with regard to EoIs for major cities. Gail is at a disadvantage vis-a-vis RIL as it has to depend on a third party for gas supplies. RIL, on the other hand is vertically integrated and will source its gas from its own fields. RIL has said in its application that RGCL will source gas from its parent company RIL which has 35 exploration blocks.

Interestingly, RIL has successfully leveraged its tie-up with its competitor Gail for transportation of gas. RIL has proposed to use Gail’s HBJ and DUPL pipelines for many cities where it plans to set up its city-gas business. But, Gail could not leverage the arrangement between the two parties for its projects. Earlier, RIL signed an MoU with Gail for co-operation in the gas sector.

Identified areas of joint co-operation has been natural gas pipeline transmission and marketing, CBM gas opportunities, city and local gas distribution, operations and maintenance (O&M) services, exploration, production and technology and knowledge sharing.

Surprisingly, the petroleum ministry is understood to have permitted Gail to bid only for seven tier-II cities including Kota, Jhansi, Mathura, Sonipat and Dewas (where it is the single interested entity). While in theory, navratna companies are free to take business decisions, in practice they have to get formal or informal approval of the administrative ministry before making any major move.

So far, the downstream regulator has received EoIs for 59 cities, with interests of RIL and Gail overlapping in only two cases viz., Ghaziabad and Gwalior. The list of 52 cities where RIL is the sole interested party includes Noida, Faridabad, Gurgaon, Navi Mumbai, Bangalore, Hyderabad, Pune, Chandigarh, Lucknow, Chennai, Amritsar, Ludhiana, Surat, Nasik, Agra, Jaipur and Coimbatore. 

GAIL signs MoU with BPCL

July 25, 2008. GAIL (India) Limited and Bharat Petroleum Corporation Limited has signed an Memorandum of Understanding for cooperation in the areas of Natural Gas –Transmission and distribution, LPG Pipeline, City Gas Projects, Exploration & Production, use and marketing of Naphtha, Infrastructure Projects and Technology & Knowledge Sharing.

GAIL and BPCL have agreed to cooperate and examine various options available for transmission/distribution of BPCL’s gas from different sources on ownership / contract carriage / common carrier basis through the existing pipeline network of GAIL and new infrastructure being created and planned by GAIL. Both companies have also agreed to cooperate each other in sourcing of Natural Gas/ LNG from overseas.

Calcutta Compressions to sell part of converted gas in local market

July 22, 2008. After having entered into a firm agreement to buy coal bed methane (CBM) from ONGC’s Jharia field, Calcutta Compressions and Liquefaction Engineering Pvt Ltd (CC&L), which is to convert CBM into compressed natural gas (CNG), is now exploring opportunities to sell in the local market part of the converted gas.

CBM produced by ONGC from Jharia has methane content of over 95 per cent. Since the low volume does not justify laying a pipeline network for transportation of the gas to the city from Jharia, which is 280 km away, the company is considering transportation by road in cryogenic containers. The company was also negotiating with state-run Greater Calcutta Gas Supply Corporation (GCGSCL) for a probable tie-up in city gas distribution.

GCGSCL currently supplies coal gas - a synthetic gas with low methane content produced from coal by Coal India Limited – in and around Kolkata. Interestingly, the initiative coincides with Calcutta High Court ruling on July 18 to make it mandatory for all 80,000 odd auto-rickshaws to run on green fuel, either LPG or CNG, latest by December 2009. The court has also banned plying of commercial vehicles older than 15 years in and around the city

Policy / Performance

Oil companies to get $6 bn oil bonds for Q1

July 28, 2008. Finance Ministry has agreed to issue Rs 24,500 crore ($5.76 bn) oil bonds to the oil marketing firms for April-June period in 2008 to compensate them for losses incurred on account of selling petrol, diesel, kerosene and LPG at a subsidised rates. According to a letter by the Finance Ministry to Petroleum Ministry, IOC, BPCL and HPCL will get Rs 13,527 crore ($3.1 bn), Rs 5,766 crore ($1.3 bn) and Rs 5,207 crore ($1.2 bn) in oil bonds respectively.

GAIL bags safety award

July 28, 2008. GAIL (India) Ltd has bagged the two coveted "Oil Industries Safety Award" from Oil Industries Safety Directorate (OISD) for the year 2007-2008. GAIL's HVJ pipeline achieved the first position in safety standard under Cross Country Pipelines group while GAIL's Gas Processing Unit at Vijaipur achieved first position in safety standard under Other Processing Organizations group.

Gas Processing Unit at Vijaipur has received the award for the fifth consecutive time this year. This is for the 12th consecutive year that GAIL's HVJ Pipeline has received the Best Performer Award from OISD. Gas Processing Units of GAIL at Vijaipur, Pata, Usar and Vaghodia have been receiving Best Performer awards from OISD in the previous years. GAIL attaches great importance to Safety, Health and Environment in its plants, pipeline systems and work centres as also in the community and its work environment.

The Company follows the guidelines and stipulations issued by the concerned Indian Statutory Agencies and Regulatory Bodies like the Central Pollution Control Board and the State Pollution Control Boards with regards to environment. GAIL has received the prestigious ISO-14001 certification for adherence to world-class environment safety standards for its LPG plants at Vaghodia and Vijaipur and the HVJ compressor station at Vijaipur.

Govt to divest 10 pc in OIL to three oil marketing companies

July 24, 2008. Government mulls offloading 10% of its shares in Oil India Ltd (OIL), to Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp as a pre-IPO (Initial Public Offer) placement before OIL's share sale hits the market in October this year, the share sale to the oil marketing companies will have a lock-in period of one year.

The initial public offer of OIL, along with that of hyrdo-power generator NHPC, is part of the government's plans to divest its stake in public sector companies to fund social programmes. Money raised from selling shares to the public will go to the companies while the government will keep the money earned by selling part of its post-IPO shareholding.

Petrol pumps told to sell less, start offs

July 23, 2008. The oil marketing companies (OMCs), which have projected under-recoveries of Rs 2.15 lakh crore ($51.1 bn) in 2008-09 despite the hike of Rs 4 per litre in petrol and Rs 2 in diesel in June, have sent out messages to petrol pumps in Maharashtra to sell less auto fuel, control timings of the pumps, start weekly off and concentrate on demand management. OMCs at their recent interaction with auto fuel dealers have also asked them to make payments in advance as they have refused to accept cheque payments.

In some parts of Maharashtra, petrol pumps were forced to put up boards conveying non availability of diesel in particular. OMCs have also expressed their inability to supply auto fuel to them to meet their rising requirements especially, in the present pricing structure. Notably, the OMCs have projected that the price of petrol is required to be further increased by Rs 14.92 per litre, diesel by Rs 24.90 per litre, PDS kerosene by Rs 38.09 a litre and domestic LPG by Rs 338.53 per cylinder.

There are 2,700 pumps across the state including 253 in Mumbai and sell 32.4 crore litre of petrol and 4.86 crore litre of diesel per month. Due to the incessant increase in the international oil prices, the gap between the input price and the retail prices of the sensitive petroleum products has been widening. Retail prices of petrol and diesel need to be increased in line with international oil prices. OMC’s demand of advance payment has put a severe constraints on dealers as until recently they used to make cheque payments. Dealers will soon take a call on introducing a weekly off and also reduction in the timing of the retail outlet so that they can also save their costs.



Era Infra to invest $1 bn in power plant

July 29, 2008. Construction firm Era Infra Engineering Ltd will invest Rs 5000 crores ($1.17 bn) over four years in a 1,200-megawatt power project in Madhya Pradesh. It is in last-stage discussions for coal linkages. Once the project gets all clearances, it will take four years to complete. The project will be funded with equity and debt.

Sunil Hitech bags $153 mn orders

July 28, 2008. Thermal power plant building firm, Sunil Hitech Engineers (SHEL) bagged orders worth Rs 650 crore ($152.86 mn) in the first quarter of the current financial year. SHEL has bagged its single largest engineering procurement construction contract worth Rs 330 crore ($77.6 mn) from Gangakhed Sugar & Energy (P) Ltd, at Parbhani district in Maharashtra.

SHEL would also undertake a Rs 216 crore ($50.7 mn) project for Rajwest Power at Barmer, Rajasthan for the excavation and disposal of a water reservoir. The company has also received orders worth Rs 104 crore ($24.4 mn) for boilers, turbine generator (TG) sets for 2x300 MW JSW Energy Ratnagiri at Jaigad in Maharashtra alongwith order for TG sets from Mahagneco at Parli Thermal Power Station in Maharashtra.

Reliance Infra in cooperation agreement with Shanghai Electric

July 28, 2008. Reliance Infrastructure has signed an agreement with Shanghai Electric Corporation of China for implementing its mega plans in power sector. Reliance Infrastructure, earlier known as Reliance Energy has signed a framework agreement for long term cooperation with Shanghai Electric for various identified areas in Indian power sector. As per the agreement Shanghai Electric would give Reliance Infra the most favoured customer status while Reliance would give Shanghai Electric the most favoured supplier status.

The framework agreement includes setting up of joint ventures for manufacturing boilers, turbines and generators. The agreement will be valid for five years. Shanghai Electric now will give priority to Reliance Infra for designing, engineering and manufacturing of power plants as also in pricing and terms of payment. Reliance Infrastructure is implementing power projects with a capacity of over 28,000 MW.

Both companies proposed a manufacturing unit which would involve a total investment of around $3bn and is proposed to be in place by 2010. The 50:50 joint venture is being set up to cater to the growing domestic demand and neighbouring markets.

The two companies are in discussions to finalise the location for the plant, which is likely to be set up near Krishnapatnam in Andhra Pradesh on the eastern coast, where Reliance is setting up its second ultra mega power project.

 First private mega power project set to go commercial

July 28, 2008. The country’s first mega power project in the private sector is all set to go fully commercial by August 15. The 1,000 MW O.P. Jindal Super Thermal Power Plant at Tamnar near Raigarh in Chhattisgarh is being put up by Jindal Power Ltd. The Rs 4,300-crore ($1 bn) power complex which has four units of 250 MW each supplied by BHEL is already feeding over 800 MW into the grid.

Jindal Power Ltd is now embarking on a massive expansion programme involving the addition of another 2,500 MW at Tamnar itself and an additional 2,500 MW in Dumka in Jharkhand. JPL has already prepared a vision document for the company that envisages a capacity creation of 35,000 MW in another 25 years time. JPL was keen on expanding into hydel power and nuclear power as well.

CLP wins $1.2 bn power project in India

July 25, 2008. CLP Holdings has won an order worth $1.2 bn (HK$9.36 bn) to set up a power project in India, making it one of the largest foreign investors in the Indian power sector. The 1,320 MW coal-fired project in Haryana is expected to be the largest in the company's Asia Pacific portfolio.

CLP India, a wholly-owned subsidiary, received approval from Haryana Power Generation Corporation. It plans to start building the first unit by December 2011 and a second unit by April 2012. Two 660 MW units will be fitted with environmentally friendly technology that could produce the same amount of electricity by using less coal, and other advanced emission control equipment such as flue gas desulfurization facilities.

Tehri Hydro to spend $591 mn on new power project

July 24, 2008. Tehri Hydro Development Corp, a Joint Venture of the Government of India and Government of Uttar Pradesh, would spend Rs 24.9 bn ($591.16 mn) to build a power project in north India.

Tehri Hydro has received an approval from the Cabinet for the 444 MW project, which is expected to start producing power by June 2013. The project would have four units of 111 MW each. The debt to equity ratio of the project is 70:30. Half of equity for the project will be contributed by Tehri Hydro out of its internal resources and the balance will be shared between the Government of India and UP Government in the ratio of 3:1.

Tehri Hydro project would obtain Carbon Emission Reduction (CER) credits under the Clean Development Mechanism (CDM) of the Kyoto Protocol, which would further improve the economic viability of the project. The project would help build additional capacity and would help in reducing the peak-time energy shortage in the northern region. The project would also improve the hydro- thermal mix in the country.

The Vishnugad Pipalkoti Hydro Electric Project is situated in the Chamoli district of Uttarkhand on the river Alaknanda, a major tributary of Ganga. The project is located on NH-58 and is about 225 km from Rishikesh.

Transmission / Distribution / Trade

Sikkim Teesta power units synchronised with grid

July 28, 2008. All the three units of the Teesta Stage V Power Station in Balutar in East Sikkim were synchronised with the grid recently. Heavy rain accompanied by abnormally high levels of silt in the river water, in May, June and early July, had compelled complete shut down of the power station from June 12.

No plan for power cut in Kerala

July 23, 2008. According to the Electricity Minister, there is no proposal at present to introduce power cut or increase the duration of load-shedding in Kerala. The Government had not taken any policy decision to extend subsidy to the Kerala State Electricity Board (KSEB) to reduce its financial burden arising out of purchase of power from other States.

Policy / Performance

Govt asked power companies not to close thermal plants for repairs

July 29, 2008. The government has asked power generation utilities such as NTPC Ltd not to shut their thermal power plants for repairs and maintenance during the monsoon season due to soaring demand and lower-than-expected output from hydropower plants, which have been plagued by weak rainfall and high silt levels. But, this directive could result in significant problems and potential power outages. A delay in conducting operation and maintenance work would lower the efficiency of the plants and result in power failures. Capacities of around 75,000MW are facing this risk.

While routine annual maintenance typically takes 10 days, capital maintenance requires plants to be closed for 50-60 days. The more intensive capital maintenance work is typically done every five years. Getting a consent to close plants for repairs is no longer easy in the face of growing power shortage. Earlier, it used to be an automatic procedure but, with growing demand, any planned outage needs to be approved by the power ministry such an approval is difficult to come by. According to India’s meteorological department, though the country saw only a 2% dip in rainfall from what is normal, based on a 60-year average in July, the rainiest of the four monsoon months, large parts of south and central India saw shortfalls as high as 15% and 32% in both their June and July rainfall, respectively.

The majority of these thermal power units are owned by NTPC, India’s largest power generation utility, which has a power generation capacity of 29,394MW. Historically, during the monsoon season, when there’s rise in hydropower generation, thermal generation units are shut for maintenance. However, with hydropower generation remaining stagnant mainly due to poor rainfall, there is no cushion to meet the growing demand.

Government to favour Bhel ICB process

July 28, 2008. The government may tweak global tendering norms for power equipment supplies to guarantee a minimum quantity of orders for PSU major Bhel. The move is aimed at ensuring that Bhel is awarded at least four of the nine 660 MW supercritical thermal power units. As per the new proposal, NTPC and DVC together would invite equipment-supply international competitive bids (ICB) for nine units of 660 MW each. While the L1 bidder would be given five of the nine units, the balance four would be given to Bhel, irrespective of its bid. The PSU major would bag five orders if it manages to emerge as the lowest bidder.

A proposal has been forwarded by the Central Electricity Authority (CEA) and has found favour with the ministry of power. It would now be placed before an empowered group of ministers (EGoM) before tenders are invited by NTPC and Damodar Valley Corporation (DVC) from equipment manufacturers. The government proposes to invite ICBs for nine units of 660 MW supercritical equipment (boiler and turbine generators) by NTPC- seven units of 660 MW for its three power plants and Damodar Valley Corporation (DVC) two units for power plant at Raghunathpur. The ICBs would have mandatory domestic manufacturing clause, and aims to rope in more players in the equipment manufacturing sector.

As per CEA, only five companies including Bhel (boiler and turbine generator), Ansaldo Caldie (boiler), L&T-Mitsubishi (boiler and turbine generator), Toshiba-JSW (turbine generator) and Alstom-Bharat Forge (turbine generator) have indicated that they would augment or set up manufacturing facilities in the country. Keeping this in mind, it is expected that separate bids may be invited for boilers and turbine generators. A re-tendering process has been proposed in case none of the bidders decides to match L1 price for getting orders for remaining four 660 MW units. Alternatively, all the units could be offered to L1 bidder.

TNEB to buy surplus power from captive plants

July 27, 2008. Tamil Nadu Electricity Board (TNEB) has invited bids from cogeneration unit operators and captive power plant owners to supply surplus power to the grid. TNEB hopes to buy over 100 MW power from the cogeneration units and about 400 MW from the captive power plants within the State to meet the short-term requirements for August. Recently, the Government announced that Tamil Nadu was facing a 1,000 MW shortage of power on a maximum demand of about 9,500 MW.

TNEB has implemented a staggered power holiday for the industry and residences through which is cuts down on a demand of about 700 MW. Industry estimates that there is over 400 MW of cogeneration capacity available with the private sector sugar mills in the State and about 850 MW of captive power, including about 500 MW of liquid fuel based units and group captive units and about 250-300 MW of coal based power mostly with the cement plants.

In addition, there is a huge capacity of diesel operated generators that are used as a back-up power for which estimates of installed capacity are not available. According to industry sources, the move has met with lacklustre response from the potential bidders, particularly the cogeneration units, as they find the terms unviable.

Plea for workable power model

July 27, 2008. The Southern India Mills Association (SIMA) has demanded a workable model for captive power generation to save the industry from closure. The Association welcomed the Tamil Nadu Electricity Board (TNEB) notifications inviting tenders for procurement of short-term power from captive power plants and co-generators within the State.

As per the Association, the new approach would help the electricity board bridge the gap in supply, albeit to a marginal extent. But this would not work in the textile industry since many of the units did not have the facility to convert 440 Volts into 11 KV and export to the grid.

The Association emphasied that the board has to come out with a workable model in view of the need to sustain the survival of the industry and save job loss and revenue loss to the Government. The textile industry alone has over 1000 MW HSD oil gensets and 150 MW furnace oil gensets. The captive power generation capacity would be more than 3,500 MW. The State would be able to manage the power shortage easily till 2011 if the Government evolves a workable model.

SIMA members resolved the need for restricting power cut only for power holiday of 24 hours in a week and not beyond, distribute the power shortage uniformly throughout the State without any discrimination, restrict new connections leading to additional load, ensure adequate supply of diesel to operate captive power plants, reduce maximum demand charges and electricity deposit in proportion to electricity supplied, reimburse differential cost of Rs 8 per unit (KWh) for running captive power plants and supply SKO to the industry at concessional rate.

The association has been insisting the Electricity Board to reimburse the additional variable cost of operating the captive power plants for captive consumption. The TNEB is paying Rs 7-15/unit of power purchased from independent power plants under the MoU route.

Energy sector prices fuelling inflation

July 25, 2008. A steep rise in energy sector prices has increased the wholesale price index-based inflation during June 2008. The WPI-based inflation rate rose to 10.7 per cent for June this year from 7.5 per cent during first two months of the current fiscal, according to the National Council of Applied Economic Research (NCAER).

The increase by more than three per cent is largely due to jump in the rate of inflation in the case of WPI for fuel, power, light and lubricants, by more than double. Although, there was an increase in year-on-year rate of price rise in the case of primary articles as well as manufactured products, but the rise was the sharpest in the case of energy sector. The rise in prices in recent months has not been limited to India. Prices have also shot up all over the developed world and in major developing countries.

ONGC plans to enter uranium mining

July 25, 2008. ONGC is reportedly planning to enter uranium mining in partnership with Uranium Corporation of India (UCIL) to capitalise on the shortage of nuclear fuel in the country. According to the company, it is a good time to get into the business as the nuclear deal with the US is likely to come through.

Another factor prompting companies like ONGC and Reliance Industries to foray into uranium mining is the high international prices. Global uranium prices are around S$4 per ounce, up 9.3% in the last three weeks. India, which has only 0.8% of the world's uranium reserves, will need to double its current reserves of 78,000 tons to meet its plans to generate 20,000 MW of nuclear power by 2020.

Reliance Industries, Reliance Power eye CTL projects

July 23, 2008. Reliance Industries (RIL) and Reliance Power are reportedly planning to bid for the Government’s coal-to-liquid (CTL) projects. Others in the race for the projects include the Tatas, GMR, Indiabulls, Videocon, Gujarat State Petronet, JSW and IOC.

The Government has put on offer three coal blocks in Orissa with combined estimated reserves of 6bn tons for CTL projects. An inter-ministerial group, with representations from the Planning Commission, ministries of finance, coal, commerce, petroleum, and others, is now expected to examine the proposals.

RIL had earlier proposed to invest $8 bn to establish a CTL project and sought coal mines with reserves of about 1.5 billion tons. South Africa’s Sasol, the world’s largest producer of liquid fuels from coal, had also evinced interest in establishing $8 bn CTL project in India in collaboration with the Tatas. CTL is a process to convert fossil into liquid fuels such as petrol, diesel, naphtha, aviation turbine fuel, LPG and others.




BP sees Thunder Horse on stream by year-end

July 29, 2008. British oil company BP Plc’s giant Thunder Horse field in the U.S. Gulf of Mexico would come on stream by the end of the year. The long-delayed field, 150 miles southwest of New Orleans, will produce a maximum of 250,000 barrels per day of oil and 200 million cubic feet per day of natural gas when it reaches peak production.

Exxon Mobil starts up $1.3 bn project in Nigeria

July 29, 2008. Exxon Mobil Corporation’s affiliate has commenced operations of a $1.3 bn project in Nigeria to produce and sell natural gas liquids, providing a new source of energy and economic benefits while reducing environmental impacts.

Operated by Mobil Producing Nigeria Unlimited, an ExxonMobil affiliate, the East Area Natural Gas Liquids II project involves the recovery of 275 mn barrels of natural gas liquids from associated gas produced in East Area reservoirs from Blocks OML 67, 68 and 70.

Major components of the project include an offshore natural gas liquids extraction complex, more than 125 miles (200 kilometers) of new natural gas and natural gas liquids pipelines and expansion of the existing onshore Bonny River Terminal for fractionation of the liquids into commercial products and offloading.

The natural gas liquids project is part of an integrated approach to significantly reduce flaring in conjunction with the existing East Area Additional Oil Recovery project. The East Area NGL II project will produce at its peak about 50,000 barrels of natural gas liquids per day. It is designed to ultimately recover 275 mn barrels of natural gas liquids and utilize 950 million standard cubic feet of gas daily.

The East Area NGL II project was completed ahead of schedule with outstanding safety performance and demonstrates ExxonMobil's ongoing commitment to helping meet the world’s growing need for energy. The East Area NGL II development continues Mobil Producing Nigeria’s tradition of strengthening and expanding the capabilities of Nigerian companies, which provided in-country fabrication, logistics support and other services, as well as training and development of employees and contractors.

A key part of NGL II development’s national content strategy included the use of funding from Nigerian banks. Approximately $220 mn of the total project financing was completely arranged through Nigerian banks.

The natural gas liquids project follows the successful start-up of the East Area Additional Oil Recovery project in June 2006. Together, the two developments provide for recovery and commercialization of associated gas streams in the field and gas injection into existing reservoirs for recovery and production of additional oil volumes.

These projects significantly reduce routine flaring, which helps meet the environmental stewardship goals of ExxonMobil and Nigeria. The project is located approximately 17 miles (28 kilometers) offshore Nigeria and on Bonny Island, Nigeria. Mobil Producing Nigeria (51 percent interest) is operator of the project with co-venture partner Nigerian National Petroleum Corporation (49 percent).

The startup of the NGL II project brings the total of ExxonMobil worldwide startups to five this year, including Kizomba C Mondo (Angola), Volve (Norway), Starling (U.K.) and ACG Phase 3 (Azerbaijan).

Novatek production increases for 2008

July 29, 2008. OAO Novatek has reported preliminary production data for the second quarter and first half 2008. Gross production for the second quarter totalled 7.5 bcm of natural gas and 603 thousand tons of liquids (gas condensate and crude oil).

Gross natural gas production increased by 210 mcm, or by 2.9%, and gross liquids production increased by 10 thousand tons, or by 1.7%, as compared with the corresponding gross production in the second quarter 2007. In the first half 2008, gross production for Novatek totalled 15.19 bcm of natural gas and 1.24 mt of liquids.

Natural gas production increased by 290 mcm, or by 1.9%, whereas gross liquids production increased by 29 thousand tons, or by 2.4% as compared with the corresponding gross production in the first half 2007. In the second quarter and first half 2008, Novatek processed 515 and 1,066 thousand tons of unstable gas condensate at the Purovsky Gas Condensate Processing Plant (Purovsky Plant).

Gran Tierra's reserves estimated at 21 mmbbl

July 29, 2008. Gran Tierra Energy Inc. has announced the results of a mid-year reserve for the Costayaco field in the Chaza Block located in the Putumayo Basin of Colombia. Gran Tierra Energy holds a 50% working interest and is the Operator of the Costayaco Field and the Chaza Block. Solana Resources Limited holds the remaining 50% working interest. An independent reserve evaluation of the Costayaco field using 3-D seismic and drilling results from four wells (Costayaco-1 through -4, not including test results of Costayaco-4 as these test results are not yet available) indicates that the Costayaco field has gross proved reserves of 20.5 million barrels of oil (MMbbl), gross proved plus probable reserves of 34.9 million barrels of oil and gross proved plus probable plus possible reserves of 61.4 million barrels of oil.

Gran Tierra Energy's reserves, net of royalty, compared to year end 2007 for the Costayaco Field as of July 1, 2008 are as follows: Proved reserves are 6.67 million barrels of oil compared to 3.27 million barrels of oil at year end 2007, an increase of 104%; Probable reserves are 4.32 million barrels of oil compared to 3.32 million barrels of oil at year end 2007, an increase of 30%; Possible reserves are 7.91 million barrels of oil compared to 2.60 million barrels of oil at year end 2007, an increase of 204%; Total proved, probable and possible, net after royalty, reserves in the Costayaco Field are 18.90 million barrels of oil compared to 9.19 million barrels of oil at year end 2007, an increase of 106%.


BP presses forward with Whiting expansion

July 29, 2008. Oil major BP PLC (BP) has taken the final investment decision to upgrade its Whiting refinery in Indiana in order to run on 80% Canadian heavy crude oil. While construction on the Indiana project has stayed on course in recent months, BP faced persistent criticism from environmentalists over the effects of upgrading the "heavy" low-quality Canadian crude.

The Whiting expansion is scheduled to be completed in 2011 and will increase gasoline production by 1.7 million gallons a day. BP processed an average of 2.239 million barrels a day through its refineries in the second quarter and increase over the same quarter last year. The higher output was mainly from recoveries at the Texas City and Whiting refineries. The company posted a 28% rise in second-quarter net profit, from skyrocketing oil prices and its Russian joint venture. 

PetroChina starts processing high-sulfur crude at Dalian

July 28, 2008. PetroChina Dalian Refinery imported 270,000 tons of high-sulfur crude from Kuwait, indicating that Dalian Refinery is ready for processing high-sulfur crude. To refine high-sulfur oil is regarded as a move to trim refining losses for PetroChina under the domestic capped oil products pricing system.

Dalian Refinery is able to process 15.5 mtpa high-sulfur but lower-price crude that mainly comes from Kuwait, Venezuela and Saudi Arabia. PetroChina's Liaoyang Petrochemical refinery, located in northeast China, in July also completed a test run of processing Venezuelan oil.

It plans to refine 500,000 tons of crude from Venezuela this year. To refine high-sulfur crude requires specialized processing facilities. Both Dalian Refinery and Liaoyang Refinery have revamped their utilities accordingly.

Interline completes Wyo. topping refinery

July 28, 2008. Interline Resources Corp. has completed construction of the NorthCut Refinery in Converse County, Wyo. The NorthCut Project is ready for full operation after one year of construction.

The refinery is a 5,000 bbl per day topping refinery which is intended to make full use of local crude supplies and produce off-road diesel and virgin gasoline (naphtha) for use in local markets.

CB&I wins contract for sulfur processing complex

July 24, 2008. CB&I has been awarded a contract in excess of $100 mn by a major North American refiner to design and build a sulfur processing complex. This project was awarded in the second quarter of 2008 and is scheduled for completion in 2010. CB&I has an established leadership position in sulfur technology.

As refiners plan expansion projects to meet unprecedented market demand, CB&I's proprietary sulfur technology provides solutions for meeting strict clean air requirements by eliminating 99.8% or more of the naturally occurring sulfur from the feed streams. CB&I combines proven process technology with global capabilities in engineering, procurement and construction to deliver comprehensive solutions to customers in the energy and natural resource industries.

Transportation / Trade

FERC okays Midcontinent Express Pipeline

July 28, 2008. The Federal Energy Regulatory Commission (FERC) authorized the construction and operation of a new 506.1 mile interstate natural gas pipeline proposed by Midcontinent Express Pipeline, a joint venture between Kinder Morgan Energy Partners, L.P. and Energy Transfer Partners, L.P. The project would be located in various counties and parishes in Oklahoma, Texas, Louisiana, Mississippi and Alabama and would serve rising demand for energy.

The Midcontinent Express Project plans to transport up to 1.5 bcf of gas per day (Bcf/d) to customers in Southern and Eastern markets. The project involves 506 miles of new 30-, 36- and 42-inch diameter interstate natural gas transmission pipeline, approximately 111, 420 horsepower of compression at one booster and four new mainline compressor stations, and related facilities located in portions of Oklahoma, northeast Texas, northern Louisiana, central Mississippi and Alabama. The plans also call for Midcontinent to lease up to 272,000 Bcf/d of capacity on the Oklahoma intrastate system of Enogex Inc. FERC's authorization follows an extensive and comprehensive review of the environmental issues analyzed in the environmental impact statements prepared by FERC scientists and engineers. FERC adopted staff's recommendations and will impose 40 conditions on Midcontinent Express to mitigate any potential adverse impact on the environment.

County board unanimously okays pipeline resolution

July 25, 2008. The Macon County Board unanimously approved a resolution at a special meeting allowing Rockies Express to begin construction of the company's high-speed natural gas pipeline. The $5 billion, 1,679-mile pipeline when completed will carry natural gas from the Rocky Mountains through eight states to Ohio.

Virgin Islands weighs gas pipeline to Puerto Rico

July 25, 2008. The U.S. Virgin Islands may build a pipeline to replace diesel-generated power with natural gas brought in from a bigger grid in the nearby U.S. territory of Puerto Rico. The shift would save the U.S. Virgin Islands Water and Power Authority (WAPA) and its customers a significant amount of money.

The average household in the three-island U.S. territory of 130,000 residents now pays $210 a month for electricity. An undersea pipeline would transfer natural gas to St. Thomas from the outlying Puerto Rican island of Culebra if a deal is struck in coming months.

To cut its own dependence on oil, Puerto Rico's state-owned power utility is planning to boost investment in natural gas generators, wind, wave and other kinds of alternative energy, and has earmarked millions of dollars for wind power over the next 20 years.

Work on Mozambique-Africa oil pipeline to start soon

July 25, 2008. Construction of a $600 mn oil pipeline linking Mozambique to South Africa will begin by the end of the year. The 500-kilometre pipeline will link Mozambique's capital Maputo to the Quendal region in neighbouring South Africa's Gauteng province, the country's economic hub where Johannesburg and Pretoria are located.

The pipeline, which would transport 6 billion litres of oil per year to Gauteng, was vital to boost the region's economic growth in the near future. While Mozambique has plentiful gas deposits, it is not an oil producer. But its ports provide easy access to Gauteng. Maputo port is only about a six-hour drive north-east of Johannesburg.

The nearest port to Johannesburg in South Africa - Durban, also a six- hour drive - is heavily congested. The pipeline is primarily destined for South Africa, but there are other countries in the region interested in extending it from South Africa, principally the diamond-rich nation of Botswana.

The project is to be implemented by a $1.5 bn joint venture between Mozambican and South African companies. Petromoc has the biggest stake, with 40 per cent. South Africa and Mozambique work closely in the energy stakes. South Africa's state petrochemical giant Sasol and Mozambique Hydrocarbon Company have just completed an 856-kilometre pipeline to transport natural gas from Mozambique to Sasol's refinery across the border in Secunda, Mpumalanga province.

Policy / Performance

‘Oil prices could fall to $78 under right circumstances’: OPEC

July 29, 2008. According to the president of Organization of the Petroleum Exporting Countries (OPEC), crude oil prices above $120 a barrel are abnormal but they could fall to around $78 under the right circumstances.

If the dollar continues to strengthen and the political situation improves, then the long-term prices will be about $78. According to the OPEC chief, the market was well-supplied with oil, refuting arguments that there is a world shortage of the commodity and members of the OPEC should increase production.

Barbados oil-rights auction includes Venezuelan waters

July 29, 2008. According to the Venezuelan government, it is taking steps to make Barbados desist from auctioning petroleum areas that would penetrate Venezuela's continental shelf in the Caribbean. The statement referred to Barbados' offer of 26 offshore blocks for oil and gas exploration, two of which encroach in some of their parts into Venezuelan territorial waters.

According to reports, in the Venezuela, the 26 areas cover an area of some 70,000 sq. kilometers (27,000 sq. miles) in which would be included the blocks of Botton Bay and Crane Bay, and which would include some 5,200 sq. kilometers (2,000 sq. miles) of Venezuela's continental shelf. The submission of bids for the Barbados project will end in September and the winners of the auction are scheduled to be announced on November 20, 2008.

Ecuador, Andes Petroleum likely to sign new production contract

July 28, 2008. Ecuador's government and China-based oil company Andes Petroleum Ecuador Ltd. will likely sign a new one-year transitory production contract in the first week of August. Andes is a joint-venture between two giant Chinese government oil companies, China National Petroleum Corp. and China Petroleum & Chemical Corp. (SNP), known as Sinopec. Earlier this year, Ecuador began renegotiating with foreign oil companies operating in the country to change their production contracts into service-providing contracts. Under current contracts, the state receives a percentage of profits from oil production.

Under the proposed service-providing contracts, all of the recovered crude oil would belong to the state, while companies would be paid a production fee and be reimbursed for investment costs. While it is negotiating the new service-providing contracts, the government intends to sign temporary one-year contracts, raising the state take on companies' revenue.

The government wants to get a part of the extraordinary revenue caused by high oil prices. It first said it would take 99% of the extraordinary revenue, but then lowered its demand to 70%. In the case of Andes Petroleum, the original contract stated that windfalls resulting from high oil prices would be evenly divided between the government and the company.

Brazil, Trinidad-Tobago to assess refinery projects

July 24, 2008. Brazil and Trinidad and Tobago signed an agreement, calling for oil companies in both countries to cooperate to explore oil and gas in Trinidad and Tobago.

The agreement includes an assessment of refinery projects in Trinidad and Tobago, promotion and commercialization of refined products, development of ethanol and bio-diesel projects, application of gas-related new technologies and expansion of the gas industry.



Companies start excavation on new AP1000 nuclear plant

July 29, 2008. The Shandong Nuclear Power Company with Westinghouse Electric Company LLC and its consortium partner The Shaw Group Inc. broke ground one month earlier than scheduled on the Haiyang Nuclear Power Facility in Shandong Province, one of the most highly advanced nuclear power plants being constructed in the world.

The Haiyang facility will house two nuclear plants, each deploying Westinghouse's AP1000(TM) technology, the safest, most advanced and proven nuclear power plant currently available in the worldwide marketplace.

Excavation for the first of the two plants will take approximately three months to create a hole 12 meters deep (39 feet) that will house the nuclear reactor and turbine buildings. The Westinghouse consortium is working in partnership with the State Nuclear Power Technology Corporation Ltd. (SNTPC) to construct four nuclear power facilities in China, all using AP1000 technology. Excavation on the first of two other plants planned for development in Sanmen, in partnership with the Sanmen Nuclear Power Company Ltd., also broke ground earlier this year in February, more than a month ahead of schedule.

The AP1000 is the only nuclear power plant technology being built in the world today with fully automated operational/safety control functions and cooling systems, in addition to featuring the most advanced instrumentation and control in the industry. The technology also has one of the shortest construction cycles in the industry, with the first of the Haiyang plants expected to come on line in 2014.

Westinghouse, a group company of Toshiba Corporation, is the world's pioneering nuclear power company and is a leading supplier of nuclear plant products and technologies to utilities throughout the world.

Westinghouse, with Shaw, supplied the world's first PWR in 1957 in Shippingport, PA. Westinghouse technology is the basis for approximately one-half of the world's operating nuclear plants, including 60 percent of those in the United States.

In addition to the China sites, the AP1000 has been selected as the technology of choice for no less than 14 plants to be built in the United States over the next 10 to 12 years.

Russia's Rosatom to bid to build nuclear reactor in Belarus

July 29, 2008. Russian state nuclear power corporation Rosatom has agreed to take part in a tender for the construction of a nuclear power plant in Belarus. Belarus plans to build a nuclear power plant with a capacity of 2,000 MW, with the first unit to come online in 2016 and the second in 2018.

The plant is expected to have Generation III water-moderated reactors. Belarus has sent invitations to Rosatom, French-German firm Areva and U.S.-Japanese company Westinghouse-Toshiba, the three main producers of this equipment, to participate in the tender. Rosatom has officially confirmed its intention to participate and Areva had also consented to take part in the tender.

Ameren applies for new nuclear plant

July 28, 2008. AmerenUE applied to federal nuclear regulators for a license to build and operate a potential new nuclear power plant in Callaway County. The St. Louis-based utility filed an 8,000-page license application with the U.S. Nuclear Regulatory Commission for a reactor adjacent to Ameren's existing nuclear facility, the Callaway Plant, outside of Fulton.

The utility is of the view that applying now puts Ameren in a position to seek federal loan guarantees and production tax credits created by the federal energy law of 2005. Its 1,190 MW electric generating plant at Callaway accounts for 19 percent of the utility's total generation. The company said it hopes to decide by 2010 whether to proceed with the plant.

Commercial nuclear power plants now produce some 20 percent of U.S. electricity, but concern about waste disposal has hampered the industry's growth. Nevada's Yucca Mountain, billed as the nation's first nuclear waste repository, originally was supposed to open in 1998 but has been beset by lawsuits and political and scientific controversies, and cost overruns. The best-possible opening date is now 2020.

Transmission / Distribution / Trade

Duke Energy issues request for new electric supplies

July 29, 2008. Duke Energy Ohio has issued a request for proposals for up to 1,400 MW of peaking and/or intermediate generating capacity to begin delivery in the 2009-2012 period. Under the request, Duke Energy Ohio is seeking either purchased power agreements of 30 years or asset ownership proposals for generation resources that will be dedicated to serve its Ohio customers under the new Ohio energy law.

Duke Energy Ohio will give preference to assets located in the Midwest Independent System Operator (MISO) footprint or which are currently deliverable to MISO.

The request for proposals also specifies that bids must be of a minimum block of 50 MW. The company has retained Burns & McDonnell to act as an independent third party during the evaluation of the bids.

Duke Energy, one of the largest electric power companies in the United States, supplies and delivers electricity to approximately 4 million U.S. customers in its regulated jurisdictions.

The company has approximately 35,000 megawatts of electric generating capacity in the Midwest and the Carolinas, and natural gas distribution services in Ohio and Kentucky. In addition, Duke Energy has more than 4,000 MW of electric generation in Latin America, and is a joint-venture partner in a U.S. real estate company.

Kuwait texts residents again as power grid strains

July 29, 2008. Kuwait is using a mobile telephone text message campaign, for the second year running, to ask residents to conserve electricity as the desert summer heat peaks and air conditioning units strain the power grid. The OPEC member, like its oil-producing neighbours, is struggling to meet rapidly rising power demand as its economy expands on the back of record oil export revenues.

According to the ministry of power and electricity, consumption hit 9,290 megawatts. That left just over 7 percent of spare capacity in the 10,000 MW grid. Kuwait is trying to avoid a repeat of power shortages seen in 2006 as residents demand more of cooling systems in summer. Power demand hit 96 percent of total capacity last summer, when Kuwait narrowly avoided outages by using text messages and phone calls asking residents to turn off air conditioners and water boilers.

The world's seventh-largest oil exporter has boosted capacity to around 10,000 MW, from 9,000 MW last year, has plans to increase it further to around 16,000 MW by 2012. The country plans to spend more than $2.5 billion to meet power demand through 2015.

Cominco makes $14 bn deal with Canadian Coal Trust

July 29, 2008. A global consolidation of the coal industry is shifting into overdrive. Mining giant Teck Cominco will buy up all of the Fording Canadian Coal Trust for close to $14 billion in cash and stock.

The deal is just the latest in a growing string of giant acquisitions centered on coking coal, a key raw material for certain steel mills. Coking coal prices have gained more than 50 percent since April 1 to $250 a ton or more, driven by tight supplies and demand from China, India, Russia, Europe and Brazil.

Teck Cominco, the world's largest producer of zinc and metallurgical coal, will pay $12.4 billion in cash and issue 36.9 million shares for Fording Canadian. The deal is expected to close in late October, pending regulatory and investor approval.

Johannesburg braces for electricity price hike

July 28 2008. The Johannesburg would approve Eskom's electricity tariff of 20.6 percent at its next council meeting. The tariff would be implemented on August 1. This increase is a direct result of the National Energy Regulator of South Africa's (Nersa) decision to allow Eskom to levy an additional increase of 13.3 percent on its customers, on the already approved 14.2 percent increase.

Poor consumers, however, would not be given an additional increase in tariffs and their share would be covered by the city. The tariff would be applicable to structures including private houses, dwelling units, flats, boarding houses, hostels, caravan parks and industries.

Policy / Performance

Jordan seeks nuclear cooperation deals with Russia, U.S., China

July 29, 2008. Jordan plans to sign nuclear cooperation deals with Russia, the United States and China in the fall. Amman, which is seeking to develop a civilian nuclear energy program, signed preliminary nuclear cooperation agreements with Canada and Britain in late June.

It signed the first such agreement with France at the end of May. By signing the agreements, Jordan is seeking to receive from these countries the technology to build a nuclear reactor for power generation.

Jordan plans to have a nuclear power plant up and running within eight years. It will take about three years to prepare economic feasibility studies on the reactor project. Jordan is currently choosing a location for the project. Three sites in Akaba on the Red Sea are being considered.

Atomic Energy Commission was also negotiating with three international companies involved in uranium prospecting and development. The talks are expected to yield a contract later this summer to explore uranium fields in central Jordan.

Poland to build nuclear power plant

July 24, 2008. According to a report by the Energy Market Agency, Poland may run out of electricity in 12 years, and after 2020 the demand for electricity will exceed its production by 30 percent. The report suggested that around 2030 Poland will either have to import 30 percent of required electricity or build a nuclear plant by that time.

The structure of the Policy energy industry should undergo radical changes in coming years. It is estimated that hard coal resources will satisfy the home demand for 40 years and those of lignite for 30 years. The nuclear plant is the best solution for Poland.  

Renewable Energy Trends


‘Tax polluting power companies’: Energy Committee

July 29, 2008. The energy coordination committee (ECC) headed by Prime Minister Manmohan Singh has suggested imposition of a carbon tax on polluting power stations. The proposal would club India with a select group of countries that tax carbon emissions directly and boost the renewable energy initiative.

The initiative could turn Indian power stations more efficient and less polluting; it could push up power tariffs. A proposal to levy carbon tax on polluting power stations is on the table. The move would also enable the country to begin work on containing pollution at an early stage itself.

The new tax would provide more funds for renewable energy initiative whose share in total power mix is dismal at present. However, implementation of the proposal would depend on how fast the country progresses in having benchmarks for efficiency that would be important for levying a carbon tax. It is also felt that the carbon tax should not be additional burden on utilities.

The ECC has also suggested that carbon tax should not be a standalone initiative and there was also a need for introducing a system of emission trading in order to avoid problems in the country’s negotiating position on climate change. Most countries in the European Union have a system of penalising polluting industries, forcing them to buy carbon credits from efficient industries.

India proposes to add 78,577 MW of additional power generation capacity during the 11th Plan. Around 70% of this capacity would come from the thermal sector. The gross installed capacity of grid interactive renewable power in the country is estimated at 11,273 MW, 8% of the total installed generation capacity in the country. 

Greenbacks power companies investing in renewable energy

July 29, 2008. With oil prices ruling high despite recent correction, domestic companies such as Reliance Industries (RIL), Tata BP Solar, Essar Power, Suzlon and Moser Baer are investing more in renewable energy. While Suzlon, Moser Baer, Indowind and Webel raised $1.4 bn overseas in 2007 through convertible bonds for investment in green energy, RIL, Tata BP Solar and Essar Power raised $628 mn on domestic stock exchanges in 2007. According to a recent United Nations Environmental Programme (UNEP) report, Global trends in sustainable energy investments, the country saw a sharp increase in deployment of renewable energy in 2007, with an installed capacity of 11.4 GW of renewable energy. With 7.8 GW of wind power installed in the country, wind energy seems to be drawing most of the investments. However, the recent announcement of the National Action Plan on Climate Change and other policy decisions by the government are expected to ramp-up investment in solar and biofuels as well. The UNEP report says that in 2007, public market activity was marked by a series of foreign currency convertible bond (FCCB) issues from established renewable energy companies. While Suzlon raised $300 mn in May and a further $200 mn in September, Moser Baer picked up $150 mn in solar energy. Indowind raised $47 mn and Webel $16.8 mn in 2007. The trend is interesting, considering that Indian companies did not raise money on domestic stock exchanges in 2006 for investment in renewable energy. According to Indian Renewable Energy Development Agency (Ireda), the bond market appeals to investors in unsteady markets by providing a fixed return. Till 2007, convertible bonds were not issued by Indian renewable companies. 

Shriram EPC sees big revenues from renewable energy sector

July 25, 2008. Shriram EPC sees the renewable energy sector, particularly wind and biomass power, as a significant area of growth. The company’s joint venture for manufacturing wind turbine generators is expected to start production in a month’s time, making it a major contributor to its revenues. Wind turbine manufacturing and biomass projects would together contribute more than 60 per cent of Shriram EPC’s business within two years.

In biomass power, apart from growth in Engineering, Procurement and Construction (EPC) contracts for setting up biomass-based power plants, the company plans to expand its biomass power generation through another joint venture. It is also scouting for investors to grow this business.

The projects in the pipeline demand investments of over Rs 1,200 crore ($284 mn) for which it is open to inducting more investors. In the last two years, the Rs 700-crore ($165.7 mn) company has doubled its business each year and these emerging opportunities would help it sustain growth in the coming years.

In 2009-10, over 50 per cent of its revenues would be from the wind energy business, 10-15 per cent from biomass power generation projects and the balance from EPC contracts. Within the EPC business, setting up biomass-based power plants and municipal services present significant opportunities.

Tata Power aims $2 bn power projects in Gujarat

July 24, 2008. Tata Power plans to set up a unit for generating 1,000 MW of renewable energy from both solar and wind. The cost of project would be from Rs 70 - Rs 100 bn ($1.66 – 2.37 bn).

From the total target, at least 200 MW would generate from using solar power and for which the company plans to set up a unit for producing photovoltaic cells. Asian Development Bank (ADB) extends financial support to Tata Power for the construction and operation of wind energy facilities.


Korea to power up alternative energy research

July 29, 2008. Korea plans to develop new and renewable energy such as solar energy, wind power, and fuel and hydrogen cells as next-generation growth engines and export items. New and renewable energy are inexhaustible eco-friendly energy that can replace fossil fuels like oil and coal. Advanced nations like the U.S., Japan and Germany have for several years been working to develop them.

According to the Ministry of Knowledge Economy, the government will increase its spending on research and development of new and renewable energies by 60 percent from last year to W199.4 billion ($1=W1,006). The amount is almost double the total W101.5 billion that Korea spent on developing new and renewable energy technologies for 13 years from 1988 to 2000, and more than triple the W58.7 billion spent in 2004. Moreover, combining the allocation of W47 billion for new and renewable energy projects in the supplementary budget submitted to the National Assembly, this year's investment in the area will stand at some W250 billion, a more than 100 percent rise from last year's W120.9 billion. The ministry will make particular efforts to commercialize organic solar cells, develop floating offshore wind power systems, manufacture in Korea equipment for producing polysilicon for solar cells, and develop low-speed direct-drive wind generators. These efforts to developing core technologies, components, and equipment are aimed at securing advantageous positions in the future energies market. In addition, the government will work on completing a roadmap for developing new and renewable energy technologies by the first half of next year. The roadmap will include a review of the global market environment, domestic and foreign technological levels, patent analyses, and feasibility studies. Korea's spending on new and renewable energies from 1988 to 2006 was no more than 4 percent of that of the U.S. and 7 percent of that of Japan. As of 2006, the proportion of new and renewable energies in Korea's total power generation capacity stood at a mere 2 percent, falling in the bottom ranks among OCED nations.

Generate your own power

July 29, 2008. The government has placed solar energy development at the centre of its strategy for energy security and combating climate change. There is a town in Germany where most new buildings have solar power roofs that not only cater to all the energy requirements of homes, but also allow residents to sell power to the grid. With more than half the world's population living in cities now, and the figure estimated to go up to 70-80 per cent by 2025, the focus of planners dealing with climate change is shifting to making cities self-sustainable in renewable energy production.

Landfill gas will power ethanol plant

July 29, 2008. Gas from the Johnson County Landfill will help power Mid-Missouri Energy’s ethanol plant near Malta Bend. A deal with the Shawnee landfill and Integrys Energy Group Inc. will enable Mid-Missouri Energy, a farmer-owned cooperative, to use landfill gas to displace more than 90 percent of the natural gas used to produce ethanol at its plant. U.S. Energy was able to negotiate a price that allows Mid-Missouri Energy to offset part of its gas costs and use a renewable fuel to produce ethanol.

The Energy Policy Act of 2005 makes ethanol plants that replace 90 percent of direct fossil fuel use with fuel from waste eligible for an extra 1.5 Renewable Identification Numbers (RIN) per gallon of ethanol produced. RINs are used to track fuel blenders’ compliance with certain national mandates and usually are claimed by the blenders, but ethanol plants that generate extra RINs can trade them to drop fuel costs.

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[1] Christoff, P & Diesendorf, M. 2006. Economics of Nuclear Power


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